The following article was first published in Advisen's
inaugural as my first regular column. The second Journal
was published on 15 June and is available from Advisen at http://corner.advisen.com/journals.html (here).
I will republish my second column in the coming days.

Many who underwrite or broker insurance, or practice law in the
cyber/technology/privacy ("CTP") realm migrated to this
emerging area from the directors and officers liability regime. At
the same time, it did not take a crystal ball to recognize that it
was only a matter of time before CTP and D&O found a
commonality. And that time is now.

Virtually every public and private company is reliant on
computer networks and electronic data. It's a way of life in
the 21st Century. And there's no going back. Yet
with reliance comes risk. It seems we read about significant CTP
breaches involving large, multinational companies almost on a
weekly basis. CTP breaches have become a well-recognized risk of
doing business. Estimates project that over 10 percent of us
already have been hacked or had their identities stolen. I am among
them.

In light of the growing frequency—and
severity—of such breaches (whether by hackers,
hacktivists, foreign governments, teenagers or simple
thrill-seekers), legislators and regulators alike are taking a much
harder look at CTP risks and exposures. There have already been
securities fraud lawsuits arising from alleged CTP events.

In one case,In re: Heartland Payment Systems
(D.N.J. Dec. 07, 2009), a motion to dismiss was granted where the
court found that the existence of unresolved network security
issues did not, in itself, suggest that the defendants did not
value data security or that it did not maintain a high level of
security. The court further found that while knowledge of a prior
cyber attack may have been material to plaintiffs' investment
decisions, securities issuers have no general duty to disclose
every material fact to investors. (See related textbox,
"D&O, Cyber Intersect: The First Case," for
background on the Heartland securities class action.)

More recently, the well-publicized securities fraud class action
lawsuits against News Corp. arising from the London hacking scandal
provides another example of what likely will become a growing trend
of D&O litigation involving CTP issues.

Thus, it should be no surprise that on October 13, 2011, the
SEC's Division of Corporate Finance (DCF) issued a
Disclosure Guidance identifying
the types of information public companies should consider
disclosing to their shareholders about cyber risks and events that
could have a material financial or operational impact. While it is
noteworthy that the DCF has cautioned that the Disclosure Guidance
only represents its own views and "is not a rule, regulation,
or statement of the Securities and Exchange Commission and that
"the Commission has neither approved nor disapproved its
content," such cautionary comments should be taken with a
grain of salt, in my view.

YOU be the officer or director of a company that does not
"comply" with the DCF's "recommendations"
or ignores the "materiality" element and see how that
works out for you.

Indeed, the DCF emphasizes that existing disclosure rules
already require registrants to consider their
cybersecurity risks and disclose them "as necessary" to
provide "timely, comprehensive, and accurate information about
risks and events that a reasonable investor would consider
important to an investment decision."

The DCF's Guidance references a "rogue's
gallery" of cyber crimes, including malicious or unauthorized
access, denial of service attacks, and phishing, among other
events. It is beyond the scope of this commentary to rehash the
particulars of the Guidance in detail. Instead, it is my intent
here (and in future columns) to tell you things that you might not
read or hear elsewhere.

In this case, it is my view that notwithstanding that the
Guidance purports to apply only to public companies (and then,
ostensibly, is only a "suggestion"), de facto,
it applies to virtually every company, public or private, large or
small, with or without an IT department, that wants to thrive and
grow in the Cyber-age.

Why do I say this?

Consider the not so hypothetical situation involving a public
company which knows that there are shareholder plaintiffs'
firms salivating at the thought of suing it for securities fraud.
Obviously, the prudent course of action would be for the company to
adopt a proactive approach to "suggested" disclosures,
allocating resources to its potential cyber risks and exposures.
(Hello, forensic and data security experts and lawyers!)

It stands to reason that the public company will require its
business partners, suppliers, vendors and others to provide it with
parallel disclosures in order to avoid being sued for those
companies' failings. As a result of such a practical approach,
privately-held entities that have dealings with public companies
may indirectly find themselves subject to the Guidelines in order
to maintain their competitive footing in the market.

But it doesn't stop there. Let's say you are a private
company that doesn't do business with public companies. You
might say to yourself, this doesn't have anything to do with
me. Well, maybe. Or maybe not. What happens if you deal with
customers or clients, which also have actual or potential business
dealings with public companies? And let's imagine you compete
with those public companies for the client's or customer's
business. If you're the client or customer, and your
prospective public company business associate provides you with all
of their cyber-related disclosures, won't you want similar
disclosures from potential private company partners and providers
and vendors—irrespective of whether the Guidance applies
to them?

If you're that private company submitting an RFP or other
business proposal and your prospective customer or client asks for
that information, what do you say? I don't have it? I don't
have to do it? Or, quite simply, no?

Good strategy. It is a good way to virtually ensure you'll
lose the deal. Particularly if the prospective partner wants an
indemnity or hold harmless you aren't in a position to give
because you don't know what exposures you're potentially
buying.

So what is the only feasible solution other than to just shut
down your business or deal only with those (quickly decreasing
number of) companies that are unaware of or don't care about
cyber risks and exposures? In my view, the right move would be for
your company to evaluate and get its arms around its own cyber
risks and exposures—and to be in a position to address
them with the potential client or customer.

Why is this important to cyber and tech underwriters, brokers
and others?

It's obvious, right? Underwriters should be seeing increased
submissions from companies of all stripes in all sectors and
business segments, be they public or private. And they should be
beating the bushes with retail and wholesale brokers to educate
them about the risks. The brokers, then, should be knocking down
their clients' doors to educate them about this development and
impress on them the value of cyber/tech insurance.

If things go as they should, scores of new policies will be
written and dramatically increased premium will be generated,
which, of course, is good for everyone, including, most
importantly, our clients.

On July 10, 2015, the Federal Communications Commission (the "FCC" or "Commission") released its long-awaited Declaratory Ruling and Order, which was prompted by nearly two dozen petitions and letters requesting clarifications under the Telephone Consumer Protection Act (the "TCPA").

The Internet of Things and the Inevitable Collision with Products Liability, published in February 2015, identified a number of factors leading to the emergence and phenomenal growth of the Internet of Things.

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